HH: I begin today with the governor of the Buckeye State, Governor John Kasich returns. Governor, welcome, it’s great to have you back.

JK: Always glad to be on. I also enjoy it, Hugh.

HH: A couple of big issues. Yesterday, Politico took out after you on your Medicaid decision. I want to talk about that and about school funding. Your choice, where do you want to start?

JK: Well, why don’t we start, Hugh, can I do kind of a big picture? You want to talk about school funding, we just did our whole budget. In school funding, it’s being able to do about $3 billion dollars in additional infrastructure without raising taxes. It’s a giant tax cut where we’re cutting small business’ taxes in half, up to $750,000 dollars. And just to give you kind of a sense of this, when I came in two years ago, we were $8 billion dollars in the hole. And at the present time, we have a $2 billion dollars surplus. We’ve gone from 48 in job creation to number 6 in the country, and number 1 in the Midwest. As you know, the school finance issue has been boiling in this state for decades.

HH: Yup.

JK: And it’s really interesting, Hugh, what we did was we stripped politics out of the way we distribute resources. We say if you are wealthier, if you have higher property values and higher income, the state won’t do as much for you. If you have any problems in those districts, like disabled or gifted, which is not a problem, but issues in your district, we’ll give you more dollars for that. And as a result of this plan, which is very complicated, it has been met with really very strong support, particularly from the school superintendents. And I have a sense that most of this will pass the legislature, and we may be able to put our school funding issue to rest, I would hope, for a generation. So it’s a very, very positive thing. No one expected it would work this way, but it has.

HH: Let me pause for a second. You’re absolutely right. For as long as I have been a Buckeye, school funding has plagued the state because of inequities. I never thought anyone could thread the needle on this, but apparently no one gets hurt, many people get help. And I’m just curious, how did you organize the inquiry into what to do? This is policy making at its best. How did it happen?

JK: Well, it was over a year that we spent listening to everybody and trying to decide how to get this done in the right way. And what I told my team is we’re going to strip politics out of this issue. Here’s my philosophy, is you will not get good education just by throwing money at the problem. But without any money, it’s very difficult to give every kid a chance. So we spread it, and we’ve directed the resources to where everybody’s going to have a fighting chance to be successful in our state. And I think in the past, it must have gotten too political. We have a thing in Ohio called guarantees, where districts, even if they lose a chunk of their student population, still get the same number of resources or more. I have brought this to everybody’s attention, and I told them it is not fair, and it is not sustainable. And I said once we calm down here, we’re going to now have to look at how we fix that problem. But overall, Hugh, in all the decades this has been going on, I think people are surprised that there has been very little criticism, and in fact, really strong support. We also have an innovation fund. It’s a $300 million dollar fund that schools can get in a one-time grant, a one-time grant to bring innovation and change, as long as it’s going to result overall into savings in the school. So if you want to go out and buy software, and be able to do your back office operations that way, we’ll give you the money, as long as you can show that it’s going to save you money and bring some innovation. The other thing we’ve done is we’ve expanded vouchers in Ohio. So now if you’re a poor child in kindergarten up to, I think it’s 400% of poverty, we’re going to give you a chance to get a school voucher and to go to the school of your choice. So…and this also follows a lot of reforms. We did an A through F grading system, something that was done in Florida with good results. We have instituted a third grade reading guarantee to end social promotion. We have teacher evaluation in our schools. We have done building by building comparisons so that parents can determine how their school is doing as opposed to other schools. So there is a lot of reform, Hugh, and this is just part three or four of our overall efforts to try to reform our schools. We’ve also expanded vocational education, so kids that want to get skills can get it, but yet the excellences in their schools will be such that if they want to go on to a two-year school or a four-year school, they can do it.

HH: All right, let’s move on, Governor Kasich, to Medicaid, and the decision that you made this week about that, that was covered so prominently in Politico and the national media.

JK: Yeah, I mean, first of all, Hugh, we rejected the state exchange the way they wanted it. I said we’re not going to go and build something and have them tell us what to do. I am not in favor of the individual mandate by any stretch. I don’t favor what they’re going to do to collapse the insurance bans that will drive up insurance costs dramatically. But what I faced on the issue of coverage is we have a big chunk of Ohioans who make $14,000 dollars or less. Most of them are working poor. 50-60% of them are working poor. They don’t get any health insurance. Where do they go? They go to the emergency room. And when they go to the emergency room to get their primary care coverage, you know, it doesn’t work. And it also drives up the cost of insurance for everybody in our state. We had an opportunity to bring $13 billion dollars over the next 7 years of Ohians’ money back to Ohio to deal with an Ohio problem. You know, I’m not going to pass up $13 billion dollars so they can ship it out to California, or ship it over to New York. I’m going to get it back for Ohioans, because you know, Ohio’s always had the short end of the stick. And in addition to that, we’re going to do a major effort on performance reform, on waste, fraud and abuse. Our Medicaid program last year grew by less than 4%, and we took no one off the rolls or reduced benefits. It’s probably the strongest program in the country. and in addition to that, Hugh, I have to tell you, in the future, the federal government is going to eliminate paying hospitals for uncompensated care. If we don’t have this program, it will throw our rural hospitals into chaos. And when you’re governor, you have to do things, right? You can’t just pontificate, like I hear a lot out of Washington. You’ve got to do things. And to me, bringing Ohio, months back, to help Ohioans to get our whole health care system moving in the right direction, which it’s currently doing, and to make sure that we don’t destroy the kind of health care that we have in our rural areas, it was something I felt very strongly about.

HH: Now obviously, you’re up for reelection in 2014. I read the Politico piece as the beginning of the campaign of some high and left-leaning media outlets to take you down a notch, even though Ted Strickland declared he isn’t going to run against you. You’re awfully popular in the Buckeye State, and you’re in a strong position. But this decision, they tried to confuse it with the exchange decision. I want to emphasize for the audience you said no to the Obamacare exchange.

JK: Exactly.

HH: Would you tell them why?

JK: Well, because they were going to drive up our costs and tell us what to do. And I’m like, I’m not paying for that. That’s not in Ohio’s best interest. That didn’t make any sense to me. That was a no-brainer, an easy decision. And I made that decision very early on. And on this decision, I made a decision, Hugh. I didn’t say well, I’m going to put this off and let the legislature figure this out, and we’ll study this. I mean, come on. Don’t we have enough of that in this country? Make a decision. Take the heat.

HH: Well, let me conclude by asking you about energy development in Ohio, because again, you’re going to have to contend with the EPA and the Department of the Interior. Are you hold them at bay even as you regulate the industry very, very carefully?

JK: Listen, I had a long discussion with John Hickenlooper, the governor, the good governor in Colorado about this. We have an opportunity to really create a 21st Century energy industry. We have tough regulations, but they’re fair. We’ve seen significant investment in Ohio, and we do not need the federal government to come in our state and disrupt our energy program. It would be bad for America, and it would be bad for Ohio. And I’ve already communicated this to people in the administration, and I have to tell you, they cannot disrupt this industry. We have the proper rules to guarantee a safe environment, but yet a successful industry that can provide jobs to Ohioans for generations. They’ve got to keep their hands off of this.

HH: Governor John Kasich of Ohio, thanks for joining me. Bottom line, from an $8 billion dollar deficit to a $2 billion dollar surplus, education reform, tax cuts, energy production, and now an incredibly efficient state government. That’s why 2014 is going to be easy for Buckeyes. He even said a good word about John Hickenlooper, a Democratic governor, so that’s a little news there.